Smartphones: Barclays Cuts Estimates, Trims QCOM View

By Tiernan Ray

Kvaal cut his overall handset growth expectations for this year and for next to 6% unit growth, down from the 8% unit growth he had been previously expecting.

For smartphones, he now sees 42% growth, down from 46%.

Although there are bright spots, such as smartphones, and some safe stocks to own, the broader handset industry is vulnerable, he avers:

We still see strong growth in certain segments, namely smartphones and tablets, and for certain vendors, namely Apple and Samsung, but the market is not escaping the current macroeconomic weakness. Our recent checks across the vendor landscape have been incrementally negative as slower end demand due to macroeconomic concerns and vendor inventory de-stocking suggest near-term market softness. We consider that our previous smartphone market forecast of 407m units for 2Q may be 10-15m units too high and, therefore, we lower our near-term forecasts. We also trim our estimates for Qualcomm modestly given the weakness and discuss further below.

Kvaal’s Q2 total handset production, including smartphones and ordinary phones, is for 394 million units, a 6% increase, year over year. He projects 1.67 billion units total for this year, again, a 6% increase.

Kvaal’s total smartphone estimate is 146 million units this quarter, and 666 million for the full year.

Kvaal cites anecdotal data points, including Nokia‘s (NOK) recent profit warning, and cautious discussion of Apple‘s (AAPL) iPhone outlook for this quarter and next, ahead of the next model.

Kvaal has one of the more dire estimates for Research in Motion‘s (RIMM) likely BlackBerry sales in the fiscal Q1 that ended last month, projecting just 6 million units, below the 9.9 million that Goldman Sach’s Simona Jankowskiis projecting, but slightly above the 5.8 million units that Morgan Stanley’s Ehud Gelblum projected.

Despite an overweight rating on Qualcomm, Kvaal did cut a penny from this year’s EPS estimate given the prospect for some slowing in chipset sales. That estimate now stands at $3.71, below the consensus $3.75.

Kvaal sees the company’s sales of its “mobile station modem,” or MSM, chipsets toward the lower end of management’s outlook:

Management has guided F3Q MSM volumes to 144-152mn. We had modelled the midpoint of guidance, though QUALCOMM of course has been at the high end of, or above, guidance in recent quarters. We reduce estimates by 3-4mn units per quarter. We lower our MSM shipments to 145mn from 148mn in F3Q and to 151mn from 155mn in F4Q. The primary drivers of this reduction are likely inventory destocking and light end demand. We had reduced estimates in April given a slightly slower availability of 28nm supply and falling 45nm demand.

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There are 16 comments

JUNE 26, 2012 11:17 A.M.

Dave wrote:

I just hate copycat analyst like this moron!

JUNE 26, 2012 11:23 A.M.

RANDY WILHELM wrote:

AAPL SALES WILL BE STRONG AGAIN. BUY AAPL COMPANY BUYBACK STARTS SOON

JUNE 26, 2012 11:25 A.M.

Wet Paint wrote:

Boring stuff here, we know phone sales will be down, we know RIM is not selling as many legacy phones prior to BB 10. Tell us something we don't know!

JUNE 26, 2012 12:10 P.M.

Anonymous wrote:

Jankowski has 9.9 million units. Could be higher if RIM is seriously paying people to take their devices. Hmm. Like what are they supposed to do with all that BB Crap? Bribes man. Consumer bribes. How's production look? Any leaks like when Quanta said they were down winding on the PlayBook?

JUNE 26, 2012 12:18 P.M.

Anonymous wrote:

Jankowski is giving RIM a bone by saying the price target is $13 and 9.9 million BB will be shipped. How or why is she so optimistic? Everything is pointing down. Even an illiterate person with their right hand over their right eye can read that.

JUNE 26, 2012 12:18 P.M.

Jim wrote:

With smartphones prices getting cheaper and cheaper and more popular, I disagree with this idiot's forecasts.

JUNE 26, 2012 12:22 P.M.

@ Jim wrote:

Dude. Tell us. How much do you think it costs to make a smartphone? And not the chocolate kind.

JUNE 26, 2012 1:28 P.M.

Jim wrote:

Cheaper than yesterday, last week, last month, defintely a lot cheaper than last year.

JUNE 26, 2012 2:01 P.M.

Martin wrote:

Tiernan - the analyst estimate of 407M smartphones for 2Q12 should be re-checked, since Gartner only showed approx. 144M smartphones sold in 1Q12 (http://www.gartner.com/it/page.jsp?id=2017015). Also, the post on this site, where Goldman reduced its handset/smartphone projections, had a 2012 smartphone estimate of only 649M units.

JUNE 26, 2012 2:13 P.M.

Bill wrote:

Apple stock price is pathetic and this Management team is useless.

JUNE 27, 2012 6:32 A.M.

@ Jim wrote:

Never mind the Raymond Babbit response.

Answer the question.

How much? Pick any smartphone models you want. Dollars and cents man. Well?

JUNE 27, 2012 6:36 A.M.

@ Bill wrote:

Stop your moaning. Happy 85. Get an enema.

JUNE 27, 2012 7:09 A.M.

@ Wet Paint soon to be Dry Paint the flake... wrote:

Something you don't know? Besides RIM going down? Hmm. How about down and OUT?! Yeah. Is that the ticket? Down and out in Waterloo. Local Conservative MPP Elizabeth Witmer resigns. Bi election could give the minority Liberal government of Ontario a majority. Unlikely. Expected backlash. Health minister Deb Matthews is a regular doctor death... Private sector has been suffocated...

The religion is over. Sorry to Canada's non elected Governor General David Johnston. Don't cry dude. The Queen will think you're un manly lanceman. You and the other pikers. LOL.

Maybe the steam punks will go for the legacy device. Canada's G&M reported that the young people there are at around 12% when it comes to picking the BB as their next smartphone. That's pretty bad because the BB is also the poor mans smartphone.

My advice to RIM's board member Roger Martin. Start writing dude. Think Shakespeare or Mozart. Show us morons and geniuses how creative and funny you are. What is trajedy and ruin in your hands? Could be your best work to add to the cultural repository. Need be publish posthumously.

JUNE 27, 2012 10:29 A.M.

Tiernan Ray wrote:

Martin: Indeed, Kvaal's language in the quote is confusing. I've update the post with his actual numbers. The 407 million estimate appears to have been his total *handset* forecast for Q2, which is now 397 million units, whereas the smartphone estimate is merely 146 million units.

JUNE 27, 2012 11:39 A.M.

freddysrevng wrote:

Title of this article should be: "AFTER BB 10 RELEASE, HOW WILL AAPL COMPETE WITH THE OLDEST AND MOST TIRED OS IN SMARTPHONES"????

Now that would illustrate what this chap is trying to say. Take a look at Galaxy 3 reviews and you will, inevitably, see a vast majority of people talking about leaving iPhone 4s because they were "BORED" with iOS.

Wait til they get a load of BB 10....

Door open..... Enter BB 10....

JUNE 27, 2012 2:21 P.M.

@ freddysrvng wrote:

Here's something to think about moron. Samsung is not exactly RIM's friend either. Duh. LOL. Nor will they ever be.

The more successful the Galaxy III is etc the less chance BB10 has. Gosh Piker are you ever stupid.

You can hate Apple all you want. And you can support Apple's competition. The bottom line is: No matter what. None of it helps RIM or BB10. ROTFLMAO.

About Tech Trader Daily

Tech Trader Daily is a blog on technology investing written by Barron’s veteran Tiernan Ray. The blog provides news, analysis and original reporting on events important to investors in software, hardware, the Internet, telecommunications and related fields. Comments and tips can be sent to: techtraderdaily@barrons.com.